Binary Options Edge Calculator
If you have already been trading binary options for some time, you probably have some statistics collected about your trading system. One of the most common and easy-to-calculate statistics is a win rate. A win rate is your statistical probability to win a binary trade. It can be calculated as the number of winning trades divided by the total number of trades and multiplied by 100%. For example, if you win 6 out of 10 trades on average, your win rate is 60%.
If you know your system’s win rate, you can calculate your trader’s edge, which is can also be called expectancy — the amount of money you can expect to earn (or to lose) from each trade on average. The expectancy calculator below lets you calculate your trader’s edge by supplying your win rate, the binary option’s payout rate, and the out-of-money reward (if any). The general formula for a system’s expectancy is WR * P + ((1 – WR) * (OOM – 1)), where WR is your win rate, P is your payout, and OOM is your out-of-money reward.
Your strategy's edge is %. It means that if you make a sufficiently large number of trades, you will earn $ on every $1 of risk you take.
Using a $100 trade size, you will end up with a profit of about after 1,000 such trades.
It's important to keep in mind that the win rate of your strategy likely fluctuates and isn't precisely measurable. Also, brokers do change payout rates for their binary option contracts. This means that such calculations as presented above are purely hypothetical and cannot be relied upon without understanding their weakness.
You also may want to try our broker's edge calculator to understand how fare your broker's binary option pricing is.